By Shashwat Chauhan and Joel Jose
June 26 (Reuters) – Nasdaq futures slid more than 1% on Friday, as chipmakers came under renewed selling pressure after a stellar run this quarter, with investors questioning high valuations and the repercussions of massive AI spending by companies.
Micron Technology shed 6.4% in premarket trading after jumping more than 15% in the previous session. Intel and Advanced Micro Devices were down over 3.5% each and Nvidia slid 1.7%.
The S&P 500 and Nasdaq were on track for sharp weekly losses as high-flying chipmakers hit a rough patch despite strong earnings from market darling Micron Technology, while Apple’s move to raise iPad and MacBook prices due to soaring memory and storage chip costs stoked fresh concerns about inflation.
Apple’s shares slumped 6.1% on Thursday, their biggest one-day drop in over a year, following price hikes. The stock edged up 0.9% before the bell.
“The selling in the tech stocks is reflecting higher interest rates down the road,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
“Market didn’t like Apple hiking prices because that could mean higher consumer prices down the line.”
U.S. inflation rose above 4% in May for the first time in three years, data on Thursday showed, boosted by higher energy prices linked to the Middle East conflict, keeping the possibility of a Fed rate hike alive.
While oil prices have retreated sharply as the Middle East tensions eased, Apple’s shock move to hike prices drove fresh concerns.
“We saw a similar dynamic during the pandemic, when supply chain disruptions limited access to semiconductors. Now, we’re witnessing a comparable supply shock, this time driven by memory, which is creating renewed inflationary pressure,” said Art Hogan, chief market strategist at B. Riley Wealth.
Megacap and growth stocks were mixed, with Tesla and Alphabet edging lower while Amazon.com and Microsoft were on the rise.
A report that OpenAI was considering delaying its public debut until next year also weighed on risk sentiment towards the tech space.
Shares of Elon Musk’s SpaceX, which debuted earlier this month, were down 2.6%.
Investors expect heavy trading volume on Friday to reflect changes to the Russell indexes, including reclassification for megacaps like Microsoft and the Russell 1000’s “fast-track” addition of SpaceX.
Recent market volatility has driven investors toward overlooked sectors poised to benefit from easing inflation concerns and stronger growth prospects.
Cooling tensions in the Middle East have further helped lift the blue-chip Dow to record highs.
At 8:50 a.m. ET, Dow E-minis were down 124 points, or 0.24%, and S&P 500 E-minis were down 38.5 points, or 0.52%. Nasdaq 100 E-minis were down 388 points, or 1.3%.
Meanwhile, interest rate anxiety persisted, with traders pricing in one 25-basis-point rate hike and a near-27% chance of another by year-end, according to LSEG-compiled data.
New York Fed President John Williams said on Thursday that while inflation pressures are likely to moderate this year, they remain too high.
A final reading of June consumer sentiment is due later in the day, while the monthly jobs report is due next week.
Synaptics rose 5.8% after ON Semiconductor said it has agreed to acquire the company in an all-stock deal valued at about $7 billion. Onsemi dropped 13.5%.
(Reporting by Shashwat Chauhan, Joel Jose and Sruthi Shankar in Bengaluru; Editing by Joyjeet Das)
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